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Should Value Investors Buy Shell Oil (RDS.A) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

Shell Oil (RDS.A - Free Report) is a stock many investors are watching right now. RDS.A is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 11.78, which compares to its industry's average of 14.07. RDS.A's Forward P/E has been as high as 14.18 and as low as 9.06, with a median of 11.09, all within the past year.

Another valuation metric that we should highlight is RDS.A's P/B ratio of 1.30. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.31. Over the past year, RDS.A's P/B has been as high as 1.53 and as low as 1.15, with a median of 1.34.

Finally, our model also underscores that RDS.A has a P/CF ratio of 5.77. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. RDS.A's P/CF compares to its industry's average P/CF of 6.42. Within the past 12 months, RDS.A's P/CF has been as high as 7.90 and as low as 5.31, with a median of 6.32.

These are just a handful of the figures considered in Shell Oil's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that RDS.A is an impressive value stock right now.




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